Coming Together: Tips and Best Practices for Making the Most Out of Mergers

By Dan Schneider07.02.2018

M&A activity has recently been on the rise as credit unions continue to merge with other credit unions and occasionally even banks to expand their market share and better serve members. There were 200 credit union mergers in 2017, and that activity isn’t expected to slow down any time soon.

Even though mergers can be a positive and strategic move for institutions and the communities they serve, mergers are often stressful and challenging situations to navigate from an operational and cultural perspective. The red tape, difficult decisions and competing credit union identities contribute to these challenges. However, there are steps that can be taken to ease the pain points associated with the merger process and to ensure the transition is as smooth as possible for all parties involved.

Conduct Proper Due Diligence and Invest Time in Preparation 

Once it has been decided that two credit unions will merge, it’s time to make tough decisions about contracts, which products and services will remain, and combining cultures.

Farmington Hills, Mich.-based Community Choice Credit Union has recently experienced significant growth through both organic means and M&A activity. Throughout their 80-plus years in operation, the credit union has completed about 20 mergers. Last year alone, they completed two mergers. Needless to say, the credit union has become an expert on navigating the merger process.

Part of the credit union’s success comes from placing a heavy emphasis on proper merger preparation, which is why it established a dedicated merger team in 2014. The team includes a mixed representation of team members from key departments across the credit union, such as e-Commerce, information technology, information security, operations, human resources, lending/collections, and retail. Having a designated team in place allows the credit union to approach mergers with a unified, organized perspective that considers all areas of the credit union’s functional areas.

Sue Setera, the vice president of operations for Community Choice Credit Union, stresses the importance of conducting proper due diligence ahead of mergers. Smart executives won’t simply select all procedures and technologies from the acquiring or larger credit union to remain by default, but will rather conduct a thorough analysis of what pieces of each institution will be the best fit in the long run. “It’s important to evaluate best practices and procedures in both credit unions to determine what products and services will prevail,” she explained.

Setera also encourages credit unions to be creative with their contracts; navigating contract terminations and associated fees is an especially tricky part of mergers. “Don’t let large service providers leverage their clout and intimidate you into backing down. Secure legal advice if necessary,” Setera advises.

Community Choice also relied on resources available from its technology partners. Some vendors have a valuable arsenal of M&A tools and project teams available to support clients during this time. Technology companies often have more merger experience than the individual institution, making them a reliable resource and source of knowledge during the merger.

Include Both Merging Credit Unions to Effectively Fuse Cultures

Credit union employees will likely have some initial questions and concerns about the impending merger, such as the security of their jobs, changes in organizational structure and apprehension about a loss of credit union culture or identity.

To ease these concerns, management should be as transparent as possible with employees as soon as the merger is announced and outline what the process will look like from the beginning to end. It’s also important to explain to employees why the merger is happening and educate them on the benefits of the economies of scale. Open dialogue and conversation will make team members feel more involved, and therefore invested, in the merger. As a result, they’ll be more dedicated to making the merger a success.

To help employees from both sides feel even more comfortable and involved, Community Choice hosted trainings onsite at both credit union locations during last year’s mergers.

“We’ve learned that when team members participate in initial on-boarding training at one of their locations, they are more comfortable integrating into a new culture; it’s one less change for them. Later during our training program, new team members visit our headquarters to tour the building and new teammates.

Putting in the effort to train employees where they feel most comfortable tends to make them more accepting of and open to the merger,” explained Setera. 

Community Choice also created a space on both institutions’ intranets to house pertinent information about the merger so employees could easily and conveniently remain updated on relevant news and activities. Small gestures like this made both parties feel more in sync with one another and helped to eliminate any feelings of isolation.

Support Members during the Merger

Just as it’s important for credit unions to properly prepare their employees for a merger, members must be alerted and thoroughly prepared as well. It is valuable for credit unions to share a merger guide with members that explains everything they need to know, including why the merger is happening, details about conversion weekend, information around e-Banking services and cards, and who to contact with questions or concerns. It’s also important to make this document as concise and easily digestible as possible.

“While our member merger guide used to be a 20 page pamphlet, we’ve now reduced it to just a couple of pages. Based on merged member feedback, the necessary information is still there – it’s simply presented in a more user friendly way. We’ve gotten strong positive feedback on the guides, and they will continue to be a work in progress, especially since each merger is different” said Setera.

Credit unions should also ensure branches and call centers are appropriately staffed for conversion weekend and the following days and weeks. There will likely be an increase in calls and branch traffic, so credit unions must be prepared to help walk members through any questions or concerns. Members will appreciate the extra assistance during the transition.

During the hectic merger process, it’s important for member service to remain at the center for credit unions. After all, credit unions’ significant differentiator is their dedication to serving their communities; it’s what sets them apart. Even as credit unions grow, it’s critical that they keep sight of their core identity as a trusted service provider.

It’s an exciting time in the credit union industry, as merger activity shows no sign of slowing down. Even though mergers are an inherently difficult process, investing time and consideration upfront, proactively including both credit unions in the process and supporting members will help ease the merger process for everyone involved. Credit unions like Community Choice that have implemented these strategies have already experienced and benefitted from great merger success.

Dan Schneider is vice president, project management and implementations, for Member Driven Technologies (MDT), a CUSO that provides technology solutions for credit unions.